AirBoss expands reach, footprint with acquisitions

NEWMARKET, Ontario—AirBoss of America Corp.'s plan to grow via acquisitions or mergers is rapidly gaining traction.

For the second time in less than a year, the company has purchased a business that will expand the firm's size and reach. In this case, AirBoss plans to buy custom rubber compounder Ace Elastomer Inc. for an estimated $42.5 million. The transaction closed Aug. 31.

In October 2020, AirBoss completed its other recent major acquisition—paying around $70 million to buy the remaining 45 percent ownership of AirBoss Defense Group (ADG), a venture it co-owned with Critical Solutions Holdings L.L.C. They formed it in January 2020 through the merger of AirBoss defense products operation and Critical Solutions International Inc.

Shortly thereafter, ADG made its own mark on the acquisition trail when it completed a transaction to buy Blackbox Biometrics, the developer of the Blast Guage System of lightweight bearable blast overpressure sensors which are used by Special Forces, Army and SWAT teams in the U.S.

"We anticipate (Blast Guage) will be a future growth opportunity for this segment," said Chris Bitsakakis, president and chief operating officer of AirBoss.

AirBoss' latest deal to acquire Ace will boost AirBoss Rubber Solutions' (ARS) position in the North American rubber mixing market, especially in the color compounds segment, he said.

Ace operates mixing facilities in Rock Hill, S.C.—where the firm is based—and Chicago that provide design, formulation development and custom compounding of proprietary elastomer compounds across the natural and synthetic polymer range.

It offers a wide range of custom mix compounds for a number of different industries, including the belting, rubber roller and printing sectors, and for custom molding and extrusion applications.

Russell Foster, Ace's founder, president and majority owner, will remain in his present position as will the rest of the firm's management team.

Foster said that his company will benefit from access to AirBoss' global supply chain expertise, its research and development infrastructure, application experience and customer relationships.

ARS plans to continue operating the two plants it is acquiring in the transaction, Bitsakakis said, and it will retain the 79 people on Ace's current salaried and hourly work force.

AirBoss said in a press release that the acquisition will provide minimum overlap in its customer base and present opportunities for higher revenues. It also will strengthen the company's mixing business in a number of ways, including:

• complementing investments made by the company in 2019 in color and specialty compounding with the addition of two dedicated lines at its Kitchener, Ontario, operation;

• accelerating ARS' strategy to expand from traditional black, high volume product lines into lower volume, but typically higher margin, color and specialty markets; and

• expanding ARS' reach into the south and Midwest in the U.S.

Bitsakakis noted that the primary gains "will come through synergistic top line growth across the Ace customer base as there is room to cross sell AirBoss' traditional compounds into the Ace customer base and vice versa through to the ARS customer base."

"The Ace acquisition establishes ARS as a market leader in the rubber roll market," he said. In the rubber belting industry, he added, the two companies differentiate because "AirBoss is already a segment leader in black belting while Ace participates more on the color belting applications focusing on key attributes like non-marking, low coefficient of friction and high wear applications."

By combining the color businesses of both companies, Bitsakakis said, ARS will establish "a formidable color market share position that can continue to grow both regionally and by specific segments."

In addition, according to Ace's Foster, like ARS, "Ace's focus is on working successfully with customers across multiple channels to develop innovative and proprietary solutions and deliver high quality compounds, while operating in an environmentally responsible manner."

The Ace transaction is expected to have an immediate positive impact on earnings for AirBoss, and has the potential for cost and revenue gains across ARS in the future, AirBoss said.

AirBoss is coming off a strong second quarter that featured record profits and the firm said its healthy financial results indicate its momentum heading into the second half of 2021 will continue on the same course.

Consolidated net sales for the quarter rose 5.3 percent to $118.4 million from those recorded in the same period last year and jumped 9.3 percent to $225.8 million for the first half compared to 2020.

Net income for the quarter increased to $18.3 million from $14.4 million in 2020 and to $24.8 million from $15.2 million last year.

Bitsakakis noted that the strong results can be attributed in part to AirBoss' decision to acquire the minority interest in AirBoss Defense Group, which enabled ADG to control 100 percent of the operation's profits and cash flow.

AirBoss' Rubber Solutions business also "experienced significant year-over-year growth and continues to benefit from increased momentum in volumes, including for our specialty and niche product lines, stemming from a gradual return to normalcy at most customers' operations despite continuing supply chain challenges related to raw material supply and elevated freight costs," he said.

According to Bitsakakis, the company's other division, Engineered Products, continued to improve efficiencies and added more automation—including the installation of a series of new injection presses—"which is part of our multi-year investment to upgrade this segment's capital equipment to the latest standards. This focus on operational efficiency has helped counter surging raw material and freight costs."

AirBoss will remain active on multiple acquisition fronts for all three of its operations: Rubber Solutions, Defense and Engineered Products, he noted.

"Our pipeline of acquisition opportunities across the enterprise is deeper than it has ever been as the M&A market in North America continues to stay quite active."